The NIB Holdings Limited (ASX: NHF) share price pushing higher on Monday morning.
Following the release of its half year results, the private health insurer's shares have risen 2.5% to $5.52.
How did NIB perform in the first half?
For the six months ended 31 December, NIB reported a 1.1% decline in revenue to $1.3 billion.
And although the company reported a 0.9% increase in claims expense to $1 billion, a 14.1% reduction in operating expenses to $172.1 million offset this and underpinned profit growth.
NIB delivered a 4.4% lift in underlying operating profit to $86.9 million and a 15.9% jump in net profit after tax to $66.2 million
Despite its profit growth, the NIB board declared a flat fully franked interim dividend of 10 cents per share.
What were the drivers of NIB's growth?
NIB's Managing Director and CEO, Mark Fitzgibbon, revealed that the company added 16,000 Australian Residents Health Insurance (ARHI) members during the period. This was an increase of 2.7% and underpinned a 2.2% increase in premium income. Premium income growth would have been 4.2% if it hadn't postponed its 2020 annual premium increase by six months.
Mr Fitzgibbon also revealed that ~52% of its policy sales were to members under the age of 40, with more than 45% of its sales to people that are new to private health insurance.
Positively, NIB's membership growth in its core ARHI business is believed to be ahead of the industry growth rate. In addition, the company experienced an improvement in member retention, which helped support it profit growth.
However, the Chief Executive did warn that its above target profit margin needed to be treated with some caution.
He commented: "ARHI profitability has been slightly distorted by COVID-19 and consequential delays in treatment and claims which is still playing out. We've modelled that impact as best we can and continue to make allowance for a claims catch-up in our financial accounts."
"Yet it's an inexact science and while ever the pandemic persists, underlying claims costs trends will continue to have some noise, as we've seen with events such as the Victorian lockdowns. I also suspect there may be for many, a natural aversion to going to hospital and other forms of treatment involving close contact as a result of COVID-19," he added.
Outlook
No guidance has been given for the full year due to COVID-19 uncertainties.
However, it does expect strong sales and improved retention to continue throughout FY 2021. Though, as mentioned above, the company is expecting claims to grow as members catch up on postponed treatments.
Looking further ahead, the company is aiming to sell critical illness health insurance in China from FY 2022. It was also be focusing on building the capabilities of its Honeysuckle Health joint venture.
Finally, NIB has become the latest company to announce plans to become carbon neutral. It intends to achieve this by the end of FY 2022.
Mr Fitzgibbon said: "Although our carbon footprint is low, we see no less a responsibility in tackling global warming especially with its well established risks to population health and safety."
